In December of the current year, Colorado Corporation considers a sale of certain corporate assets that would result in the recognition of a $50,000 LTCG. Colorado’s controller estimates that taxable income for the current year will be $60,000 (excluding the LTCG). She also estimates that taxable income for next year will be $200,000 (excluding the LTCG).
a. What is Colorado’s tax liability for the two years if the assets are sold in the current year?
b. What is Colorado’s tax liability for the two years if the assets are sold next year?
c. Should Colorado sell the assets in the current year or next year? Explain.